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Please clear the air on Tax Lein Certificates vs Tax Deed sales

Flipper/Rehabber from Davie, FL

posted over 3 years ago

Tax Lein Certificates and Tax Deed sales are a hot topic, so it seems

I'm still not sure I understand the difference between a Tax lien Certificate and a Tax Deed. I know that a Tax Lein is paying the taxes owed and then you wait for maturity(owner pay taxes) if they do you can collect interest and your investment back. What I don't understand is if you buy a Tax deed do you own the land or property you bid on? I live in Florida and when I look at the two different areas for Tax Lein and Tax Deeds they seem to intersect.

Investor from Redondo Beach, California

replied about 3 years ago

Tax Lien is purchasing a lien against the property . The investor is paying the taxes. The home owner has redemption period to pay the taxes plus interest. When this is done you get your original investment plus interest (varies state to state). If the home owner doesn't pay the back taxes with in the allotted time the investor initiates foreclosure proceedings. Even after successful foreclosure there is usually a redemption period allowing the homeowner to come in and pay everything, back taxes, interests, and any out of pocket expenses incurred by the investor. Bottom line typically you get your investment plus interest. Sometimes you get the property.

Tax Deeds are generally auctioned after the homeowner is delinquent for several years. The County auctions to get the delinquent taxes, interest & service fees. At the end of the auction the investors owns the deed to the property. Please check as each state has different rules on redemption period. So even at the end of the auction the deed should "rest" during the redemption period to insure the investor does not renovate the property only to have the owner come in and redeem all costs. Even if this happens the investor gets their money back but you have also lost potential time as the property sits during redemption.

I like both strategies as options of diversification. Last June we purchased a great home great neighborhood in Tulsa OK at the June Tax Deed auction. Success story on this one. The property did require significant remodel but we remained under ARV. So we have a buy & hold property with instant equity and easy rentability.

Flipper/Rehabber from Davie, FL

Investor from Casselberry, Florida

replied about 3 years ago

Ditto, Great answer Shannon!

Michael, since you are in Florida you may be inquiring about tax deeds and liens in Florida? In Florida there is no redemption period on tax deeds. Once the investor pays the final balance on the Tax Deed and the deed issued, the homeowner can't redeem (payoff) the taxes.

I have been buying tax deeds in Florida since 2004 and love the technique. There's money to be made before the auction and after the auction. I have some videos on YouTube about the process and some of experiences.

Hard Money Lender, Broker Associate, Investor from Naples, Florida

replied about 3 years ago

Tax lien vs tax deed.

Tax liens are held for unpaid property taxes and are done at auction. The proceeds go to the government to pay the taxes due and keep services such as fire and police protection...and many more operating expenses. Once a tax lien is 2 years old, the holder of the lien may file with the clerk of courts and force a tax deed SALE to make the lienholder whole. Once a property is sold at a tax deed sale and the buyer has paid the funds, the previous owner has NO redemption period. The only exception to redemption is if the owner of the property beats the buyer to the courthouse and pays. Otherwise, if the buyer has funded, the owner is now the previous owner and has no right of redemption.

Wholesaler from Jacksonville, Florida

replied about 3 years ago

Also, in floida and a few others states. The owner has rights to the difference between the high bid and the tax deed amount by simply filling out the proper paper work. This applies to the foreclosure auction as well.

Flipper/Rehabber from Davie, FL

Michael, since you are in Florida you may be inquiring about tax deeds and liens in Florida? In Florida there is no redemption period on tax deeds. Once the investor pays the final balance on the Tax Deed and the deed issued, the homeowner can't redeem (payoff) the taxes.

I have been buying tax deeds in Florida since 2004 and love the technique. There's money to be made before the auction and after the auction. I have some videos on YouTube about the process and some of experiences.

Good Luck!

Sandra Edmond

Thanks Sandra. It's great to know that somebody in Fla. Is looking at this type of investment. I will definitely be looking at your YouTube and getting in touch with you.

from Alexander, Arkansas

replied about 3 years ago

Hello,

I just started looking into tax deeds in my state of Arkansas since there are no tax lien certificates. I am wondering if anyone has a ballpark on the amount that spent on securing a property after they purchased a tax deed? It looks like you have to seek out an attorney and get a quiet title and I'm not sure about foreclosing fees??

Wholesaler from Central Arkansas, Arkansas

Arkansas is a tax deed state. If you prefer liens, check out MD. They have a great ROI and sell over the counter liens, as well. I have also had good experiences with AL, IL, and Nebraska.

As for AR, I have only purchased one deed here and it was a bust (essentially the land can not be found!); but it was a great learning experience. If your set on purchasing deeds in AR, call the land commissioner's office. They are very nice and will take the time to answer all your qustions.

The best advice I can give you is, before you attend the sale, research the properties you want and know your max price for each one. If you don't do the research upfront, you may purchase a phantom property like I did! :)